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Record a customer refund or supplier refund in QuickBooks Online

SOLVED•by QuickBooks•22•Updated 1 week ago

Learn how to refund a customer in QuickBooks Online.

If you need to return your customer's money, don't worry. Here's how to record a refund based on various scenarios. This will make sure your books are up-to-date.

If you still think a refund is the right way to go, let's get into it!

  1. Select + New and select Credit note.
  2. In the Customer field, select the appropriate customer.
  3. Enter the Credit Note Date, Amount, GST, and Product/Service (This is the category, product, or service you’re getting a credit for).
    Note: If you choose an inventory item, QuickBooks will put it back into inventory. If the item is defective or if you don’t want it added back to inventory, you can make an inventory adjustment.
  4. Select Save and close.
  1. Open a new Credit note.
  2. In the Customer field, select the appropriate customer.
  3. Enter the Credit Note Date, Amount, GST, and Product/Service (This is the category, product, or service you’re getting a credit for).
    Note: If you choose an inventory item, QuickBooks will put it back into inventory. If the item is defective or if you don’t want it added back to inventory, you can make an inventory adjustment.
  4. Select Save and close.

Note: If the customer has overpaid – you do not need the credit note as you will already have an unapplied credit that acts as your credit note.

  1. Select + New and select Expense.
  2. In the Payee field, select or enter the desired customer.
  3. In the Payment account field, select the bank the money is being refunded from.
  4. In the Category field, select the Debtors account (Accounts receivable).
  5. In the Amount field, enter the amount of the refund.
  6. In the GST field, select the appropriate GST (not inclusive/exclusive of tax).
  7. Select Save.
  8. Next, go to + New and select Receive payment.
  9. Add the Customer and select the Payment method and Deposit to.
  10. Balance should be 0 as they will cancel each other out.
  11. Select Save and close.
  12. If you have Online Banking, go to Bookkeeping, select Transactions, then match the record found on the Bank transactions (Take me there) page.
  1. Open a new Expense.
  2. In the Payee field, select or enter the desired customer.
  3. In the Payment account field, select the bank the money is being refunded from.
  4. In the Category field, select the Debtors account (Accounts receivable).
  5. In the Amount field, enter the amount of the refund.
  6. In the GST field, select the appropriate GST.
  7. Select Save.
  8. Open Receive payment.
  9. Add the Customer and choose the Payment method and Deposit to.
  10. Balance should be 0 as they will cancel each other out.
  11. Select Save and close.
  12. If you have Online Banking, go to Transactions, then match the record found on the Bank transactions (Take me there) page.
  1. Select + New and select Supplier credit.
  2. In the Supplier field, select the appropriate supplier.
  3. Enter the Payment date, Amount, GST​, ​and Category (This is the category, product, or service you’re getting a credit for).
  4. Select Save and close.
  1. Open a new Supplier credit.
  2. In the Supplier field, select the appropriate supplier.
  3. Enter the Payment date, Amount, GST​, ​and Category (This is the category, product, or service you’re getting a credit for).
  4. Select Save and close.

Note: If the supplier has been overpaid – you do not need the supplier credit as you will already have an unapplied credit that acts as your supplier credit.

  1. Open a new Bank deposit.
  2. In the Add funds to this deposit section, enter the following information:
    • In the Received From field, select or enter the desired supplier.
    • In the Account field, select the Creditors account (Accounts payable).
    • In the Amount field, enter the amount of the refund.
    • In the Sales Tax field, select Zero-rated.
    • Select Save.
  3. Next, open a new Cheque.
  4. Add the payee and choose the Supplier Credit and Deposit (from the drawer that appears on the right-hand side) and add them both.
  5. Balance should be 0 as they will cancel each other out.
  6. Select Save and close.
  7. If you have Online Banking, go to Transactions. Then match the record found on the Bank transactions (Take me there) page.
  1. Select + New and select Bank deposit.
  2. In the Add funds to this deposit section, enter the following information:
    • In the Received From field, select or enter the desired supplier.
    • In the Account field, select the Creditors account (Accounts payable).
    • In the Amount field, enter the amount of the refund.
    • In the GST field, select the appropriate GST (not inclusive/exclusive of tax).
    • Select Save and close.
  3. Next, go to + New and select Cheque.
  4. Add the payee and choose the Supplier Credit and Deposit (from the drawer that appears on the right-hand side) and add them both.
  5. Balance should be 0 as they will cancel each other out.
  6. Select Save and close.
  7. If you have Online Banking, go to Transactions. Then match the record found on the Bank transactions (Take me there) page.
  1. Select + New and select Credit card credit.
  2. In the Payee field, select the appropriate supplier.
  3. From the Bank/Credit account ▼ dropdown, select the credit card where you received the refund to.
  4. Enter the Payment date, refund Amount, GST and Category.
    Note: The category used here is the original expense account on the original bill.
  5. Select Save and close.
  1. Open a new Credit card credit.
  2. In the Payee field, select the appropriate supplier.
  3. From the Bank/Credit account ▼ dropdown, select the credit card where you received the refund to.
  4. Enter the Payment date, refund Amount, GST and Category.
    Note: The category used here is the original expense account on the original bill.
  5. Select Save and close.

You can use refund receipts if a customer asks for a refund for an item or service. If they used a credit card, learn how to refund a credit card payment.

Note: To avoid a double refund, make sure you haven't enter a credit note yet.

  1. Select + New.
  2. Select Refund receipt.
  3. Select the Customer ▼ dropdown, then select the customer you want to refund.
  4. Select the Refund From ▼ dropdown, then select the bank you deposited the payment for the invoice.
  5. Add all products or services the customer returned in the Product/Service column.
  6. Make sure to fill the date, quantity, rate, amount, GST, and other fields accordingly, then select Save and close.
  1. Open a new Refund receipt or select Give refund.
  2. Select the Customer ▼ dropdown, then select the customer you want to refund.
  3. Select the Refund From ▼ dropdown, then select the bank you deposited the payment for the invoice to.
  4. Add all products or services the customer returned in the Product/Service column.
  5. Make sure to fill the date, quantity, rate, amount, GST, and other fields accordingly, then select Save and close.

You can record a refund to your customer using Cheque or Expense if:

  • They want to redeem their open credits.
  • They made a prepayment for an order but cancelled it before receiving the goods or services.
  • They want you to reimburse an accidental overpayment.

Using Cheque or Expense to record the refund reduces your bank's balance and offsets the customer's open credit, overpayment or prepayment.

Step 1: Record the refund for your customer

  1. Select + New.
  2. Select Expense, Add expense or Cheque.
  3. Select the customer you want to refund from the Payee ▼ dropdown.
  4. From the Payment account ▼ dropdown, select the bank account where you deposited the overpayment to.
  5. On the first line of the Category column, select Accounts Receivable.
  6. Enter how much you want to refund in the Amount field.
  7. Fill out the other fields as you see fit, then select Save and close.
  1. Open Expense, Add expense or Cheque. If you're in Business view, follow the steps to switch to Accountant view first. Then come back to these steps.
  2. Select the customer you want to refund from the Payee ▼ dropdown.
  3. From the Payment account ▼ dropdown, select the bank account where you deposited the overpayment to.
  4. On the first line of the Category column, select Accounts Receivable.
  5. Enter how much you want to refund in the Amount field. Note: It is incorrect if you add sales tax to the cheque and makes it not match the credit note (refund amount).
  6. Fill out the other fields as you see fit, then select Save and close.

Step 2: Link the refund to the customer's credit or overpayment

  1. Select + New.
  2. Select Receive payment.
  3. Select the same customer you used for the cheque or expense when recording the refund.
  4. Fill out the other fields as you see fit.
  5. Under the Outstanding Transaction section, select the checkbox for the Expense or Cheque you created when recording the refund.
    Note: If you have automation to apply bill payments turned on, this step is done for you.
  6. Make sure the payment is equal to the open balance, then select Save and close.
  1. Open Receive payment.
  2. Select the same customer you used for the cheque or expense when recording the refund.
  3. Fill out the other fields as you see fit.
  4. Under the Outstanding Transaction section, select the checkbox for the Expense or Cheque you created when recording the refund.
    Note: If you have automation to apply bill payments turned on, this step is done for you.
  5. Make sure the payment is equal to the open balance, then select Save and close.

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